Americas Gold and Silver(USAS) - 2024 Q3 - Quarterly Report

Condensed Interim Consolidated Financial Statements Statement of Financial Position As of September 30, 2024, the company's total assets were $179.4 million, a slight decrease from $180.5 million at year-end 2023, while total liabilities increased significantly to $126.3 million from $108.3 million, primarily driven by a rise in metals contract liability and a new credit facility, resulting in a decrease in total equity from $72.2 million to $53.1 million and a working capital deficit of $36.5 million Financial Position Summary (in thousands of U.S. dollars) | Metric | Sep 30, 2024 | Dec 31, 2023 | Change | | :--- | :--- | :--- | :--- | | Total Current Assets | $26,789 | $23,036 | +$3,753 | | Total Assets | $179,366 | $180,488 | -$1,122 | | Total Current Liabilities | $63,258 | $61,207 | +$2,051 | | Total Liabilities | $126,311 | $108,288 | +$18,023 | | Total Equity | $53,055 | $72,200 | -$19,145 | - The company had a working capital deficit of $36.5 million as of September 30, 2024, with cash and cash equivalents of $7.2 million[10] Statement of Loss and Comprehensive Loss For the nine months ended September 30, 2024, revenue increased to $72.1 million from $64.6 million year-over-year, but the net loss widened significantly to $36.3 million from $28.1 million in the prior year period, primarily driven by a $10.0 million loss on the metals contract liability and higher interest expenses, resulting in a basic and diluted loss per share of $0.14 compared to $0.12 in 2023 Performance Summary (in thousands of U.S. dollars, except per share data) | Metric | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Revenue | $72,133 | $64,572 | | Cost of Sales | $(58,607) | $(56,284) | | Loss on metals contract liability | $(10,044) | $534 | | Net Loss | $(36,319) | $(28,090) | | Loss per share (Basic & Diluted) | $(0.14) | $(0.12) | Q3 Performance Summary (in thousands of U.S. dollars) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Revenue | $21,018 | $18,257 | | Net Loss | $(16,159) | $(10,475) | Statement of Changes in Equity Total equity decreased by $19.1 million during the first nine months of 2024, from $72.2 million to $53.1 million, primarily due to a net loss of $36.3 million, partially offset by a $5.0 million equity offering and a $5.6 million retraction of convertible debentures settled in shares Equity Movement for Nine Months Ended Sep 30, 2024 (in thousands of U.S. dollars) | Description | Amount | | :--- | :--- | | Balance at January 1, 2024 | $72,200 | | Net loss for the period | $(36,319) | | Equity offering | $5,026 | | Retraction of convertible debenture | $5,550 | | Other comprehensive income & other items | $5,598 | | Balance at September 30, 2024 | $53,055 | Statement of Cash Flows For the nine months ended September 30, 2024, the company generated $2.4 million in cash from operating activities, a significant improvement from a $3.6 million use of cash in the same period of 2023, while cash used in investing activities was $13.6 million, primarily for property, plant, and equipment, and financing activities provided $15.5 million in cash, largely from a new $10.0 million credit facility and a $5.0 million equity offering, leading to an overall increase in cash and cash equivalents by $5.2 million to end the period at $7.2 million Cash Flow Summary for Nine-Month Periods (in thousands of U.S. dollars) | Cash Flow Activity | Ended Sep 30, 2024 | Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net cash from operating activities | $2,400 | $(3,556) | | Net cash used in investing activities | $(13,575) | $(14,996) | | Net cash from financing activities | $15,484 | $17,770 | | Increase (decrease) in cash | $5,154 | $(1,074) | | Cash, end of period | $7,215 | $890 | Notes to the Financial Statements Basis of Presentation and Going Concern The financial statements are prepared on a going concern basis, but management has identified material uncertainties that cast substantial doubt on this assumption, as the company had a working capital deficit of $36.5 million and does not have sufficient liquidity to fund operations for the next twelve months, with continuance dependent on achieving profitable operations and securing additional financing, including a significant financing agreement completed subsequent to the reporting period in October 2024 - The company reported a working capital deficit of $36.5 million and a net loss of $36.3 million for the nine-month period ended September 30, 2024[10] - Material uncertainties exist that cast substantial doubt on the going concern assumption, including the need to achieve cash flow positive production and raise additional funds[12] - Subsequent to the period end, on October 9, 2024, the company completed a financing agreement raising gross proceeds of $50 million CAD, held in escrow, and an additional $2.9 million CAD for bridge financing[11] Property, Plant and Equipment (PP&E) The carrying value of property, plant, and equipment decreased to $148.1 million as of September 30, 2024, from $153.1 million at the end of 2023, primarily due to depreciation and depletion charges of $18.6 million, partially offset by asset additions of $14.1 million, with no impairments identified during the period, and the Relief Canyon Mine, which is under care and maintenance, having a carrying value of approximately $24.7 million PP&E Carrying Value (in thousands of U.S. dollars) | Date | Carrying Value | | :--- | :--- | | December 31, 2023 | $153,101 | | September 30, 2024 | $148,094 | - Depreciation and depletion for the nine-month period ended September 30, 2024, amounted to $18.6 million[20] - The carrying amount of assets at the Relief Canyon Mine, which is under care and maintenance, totaled approximately $24.7 million as of September 30, 2024[21] Liabilities and Financing The company manages a complex capital structure with various debt and financing instruments, including a metals contract liability that increased to $49.9 million, resulting in a $10.0 million fair value loss, an amended convertible debenture with reduced outstanding principal, and a new $15 million secured credit facility with Trafigura, of which $10.0 million was drawn in August 2024, alongside ongoing obligations under promissory notes and a royalty agreement - The metals contract liability with Sandstorm increased to $49.9 million, with a $10.0 million fair value loss recorded in the first nine months of 2024 due to changes in forward commodity prices[25][30] - The convertible debenture was amended in August 2024, changing the conversion price to $0.52 CAD and increasing the monthly retraction option, with the outstanding principal at $17.9 million CAD as of September 30, 2024[38][39] - In August 2024, the company secured a new credit facility of up to $15 million with Trafigura to fund development at the EC120 project, drawing an initial $10.0 million[43] Share Capital The company actively raised capital through equity instruments in 2024, completing an equity offering of units that raised gross proceeds of $5.8 million in March, and additional non-brokered private placements that raised $0.4 million, resulting in 266.8 million common shares issued and outstanding as of September 30, 2024, alongside 14.9 million stock options and 37.8 million warrants outstanding with various exercise prices and expiry dates - In March 2024, the company completed an equity offering of 26 million units at $0.30 CAD per unit, raising total gross proceeds of $5.8 million[49] - During fiscal 2024, non-brokered private placements raised an additional $0.4 million through the issuance of 1.6 million common shares[50] Outstanding Options and Warrants as of Sep 30, 2024 | Instrument | Number Outstanding (thousands) | | :--- | :--- | | Stock Options | 14,945 | | Warrants | 37,760 | Revenue For the nine months ended September 30, 2024, total revenue was $72.1 million, up from $64.6 million in the prior-year period, primarily derived from the sale of silver, zinc, and lead, with silver sales accounting for $48.1 million, zinc for $30.3 million, and lead for $14.3 million before treatment and selling costs Revenue by Commodity for Nine Months Ended Sep 30 (in thousands of U.S. dollars) | Commodity | 2024 | 2023 | | :--- | :--- | :--- | | Silver | $48,124 | $44,163 | | Zinc | $30,321 | $30,232 | | Lead | $14,327 | $20,065 | | Other by-products | $1,114 | $981 | | Gross Revenue | $93,886 | $95,441 | | Net Revenue | $72,133 | $64,572 | Financial Risk Management The company is exposed to credit, liquidity, and market risks, with significant liquidity risk evidenced by $67.1 million in financial liabilities contractually due within one year, and market risks including interest rate risk on variable-rate debt, currency risk from CAD and MXN denominated assets and liabilities, and commodity price risk on provisionally priced concentrate sales, where a 10% change in commodity prices would impact trade receivables by approximately $0.4 million - The company faces significant liquidity risk, with total contractual undiscounted financial liabilities of $137.8 million, of which $67.1 million is due in less than one year[75] - The company is exposed to currency risk from its net liability positions in Canadian dollars (CAD) and Mexican pesos (MXN), where a +/- 10% change in the CAD/USD exchange rate would impact net loss by approximately $1.2 million[80] - Commodity price risk exists for provisionally priced concentrate sales, where a +/- 10% fluctuation in silver, zinc, lead, and gold prices would affect trade receivables by approximately $0.4 million[83] Segmented Information and Major Customers The company operates through four segments: Cosalá Operations, Galena Complex, Relief Canyon, and Corporate, with Cosalá Operations generating a net income of $0.2 million on revenue of $37.5 million for the nine months ended September 30, 2024, in contrast to the Galena Complex reporting a net loss of $6.9 million on revenue of $34.6 million, and the Corporate segment incurring a loss of $24.2 million, which includes significant financing costs and fair value adjustments, while two major customers accounted for approximately half of the revenues from both the Cosalá and Galena operations Segment Performance for Nine Months Ended Sep 30, 2024 (in thousands of U.S. dollars) | Segment | Revenue | Net Income (Loss) | | :--- | :--- | :--- | | Cosalá Operations | $37,537 | $237 | | Galena Complex | $34,596 | $(6,894) | | Relief Canyon | $ - | $(5,498) | | Corporate and Other | $ - | $(24,164) | | Total | $72,133 | $(36,319) | - For the nine-month period of 2024, two major customers accounted for 50% of revenues from Cosalá Operations and 48% of revenues from Galena Complex[97] Subsequent Events Subsequent to the reporting period, on October 9, 2024, the company entered into a significant agreement with Mr. Eric Sprott to acquire the remaining 40% non-controlling interest in the Galena Complex, with consideration including 170 million company shares, $10 million in cash, and monthly silver deliveries for 36 months starting around January 2026, and concurrently arranged a financing deal for gross proceeds of $50 million CAD through a private placement of subscription receipts to fund the acquisition and for other purposes - On October 9, 2024, the company agreed to acquire the remaining 40% non-controlling interest of the Galena Complex from Mr. Eric Sprott[100] - The acquisition consideration consists of 170 million common shares, $10 million cash, and monthly deliveries of 18,500 ounces of silver for 36 months beginning in or around January 2026[100] - To finance the acquisition, the company completed a bought deal private placement of subscription receipts, raising gross proceeds of $50 million CAD, which are currently held in escrow[100]